Formula
Cost-plus pricing builds the base first, then marks up the total cost:
Price = (direct cost + overhead per unit) × (1 + profit percent)
The profit percent applies to direct cost plus overhead, not to direct cost alone.
Assumptions
- Overhead is already allocated to one unit.
- The profit percent is a markup on total cost, not a margin on the selling price.
Worked example
A $18.00 direct cost, $4.00 of overhead, and 25% profit set a price of $27.50.
Input definitions
- Direct cost
- Materials and labor for one unit.
- Overhead per unit
- Indirect cost assigned to that unit. Zero is allowed.
Limitations
This is a planning estimate, not accounting, tax, payroll, or advertising advice. The currency control changes the symbol only.
Questions
How is this different from a markup price?
A markup price has one cost. This page adds an overhead amount before the profit percent.
Is 25% a margin on the price?
No. It is 25% of the total cost. The margin on the resulting price is lower.